12/09/2008 @ 7:00PM

Better Off Without Yahoo!

Ten years from now Steve Jobs’ iPhone will be just another obsolete gadget. Rob Bailey’s vitamin vodka, however, will still refresh.

It never would have happened if Bailey hadn’t left his business-development job at
Yahoo!
in 2006 to pursue alcoholic immortality.

Two years later, Bailey has won awards from the San Francisco Wine and Spirits Festival and the Beverage Tasting Institute and signed deals that will put his Lotus vodka in outlets such as
Safeway
and Beverages and More. “Who would have thought,” Bailey says. “I’ve scaled up from two people to eight and Citigroup has just laid off 55,000.”

Do you work at Yahoo!?: Tell us about the layoffs in the comments below, or send tips to bcaulfield@forbes.net.

Or that Yahoo!, once king of the Web, would be cutting its workforce too. Insiders say the struggling Sunnyvale, Calif., Internet portal will layoff 1,500 employees Wednesday in an effort to become a leaner, more aggressive company that can compete with
Google
. Word is Yahoo!’s sales force will be chopped by roughly 30%. Even Yahoo!’s vaunted engineers will face cuts, with more than 5% losing their jobs.

Many won’t be sorry to go. Former employees describe a management team committed to creating a “fun” environment but unwilling to make the tough decisions needed to help the company move forward. The result: Once-thriving businesses are starved of resources while obviously failed efforts live on. One Yahoo! employee who left in the spring described how colleagues still there are lobbying to get on the layoff list even if they don’t have new jobs lined up.

All newly unemployed Yahoo’s, however, will find plenty of support. “I’d like to tell them that this layoff probably has more to do with management mistakes,” says Hongche Liu, chief information architect at people-search engine Spock and a Yahoo! veteran.

But while troubled Wall Street firms, car companies, and media companies may crank out products nobody wants, demand for the online services Yahoo! employees create remains high. Liu even urges Yahoo! workers to master the monetization skills that so often seemed to elude the company. “A downturn is the best time to latch onto the next big wave,” Liu says.

Recruiters are already scouring Yahoo!’s ranks for engineers who are skilled at moving video around the Web, building big, stable Web services and making sites friendlier to search engines. Sales people who can drum up new business online while exploiting the contacts they developed at Yahoo! will also be highly sought after, recruiters say.

“The real tragedy is it was a company that was absolutely full of really bright, really motivated, tech-savvy people, and somehow that couldn’t be translated into different financial results,” Bailey says.

Or you could become an entrepreneur. Jennifer Dulski, who left Yahoo! a year ago, says working at the company was the perfect training for running her nine-person event-planning start-up, Center’d. Dulski, who joined Yahoo! when it was still small and started Yahoo! Autos, says building a business on her own was the logical next step.

And moving from big companies to little ones is part of a grand tradition in Silicon Valley, whether you’re a lowly corporate drone or run a whole division. “I look at Yahoo! as the Procter & Gamble of the Web,” Dulski says. “They took a bunch of really smart, bright people, trained them really well and they’re setting some of them free.”

In fact, many Yahoo! veterans relish returning to a smaller company. “As Yahoo! got bigger, you had more people looking over your shoulder,” says Neil Budde, a veteran of Yahoo! News who now runs DailyMe, an 18-employee online news outfit. “Two people can sit in a room and knock some stuff out, turn it over to devlopers, and you actually see it pretty quickly.”

And while Yahoo! had a round of job cuts in February, many of those leaving the company now are doing so on their own. “There was a joke for a while that it was hard to go to lunch without finding someone you knew talking to someone about a job,” Dulski says.

Tim Anderson, who left Yahoo! voluntarily in February to become director of product management at Glassdoor.com, says the environment in Sunnyvale had become unbearable.

“It feeds on itself. You know good people are at Yahoo!, you know they’re frustrated because of the endless reorgs,” Anderson says. “There is life beyond Yahoo! and for a lot of people it’s a better life. You might not have a commute, you might be working at something smaller where you can still have an impact and go to work every day and see your work come to life.”

You don’t need to be a veteran manager, like Dulski and Budde, however, to start your own company. You just need a great idea. For Bailey, who spent 80-hours a week jetting around the world to do deals for Yahoo!, it was a nasty case of jet lag that led to his stroke of genius.

“I was a single guy in my early 30s. I would come back after three days in Korea and I didn’t want to stay home,” Bailey says. “I wanted to go out and have a good time with my friends. I wanted a martini that will wake me up.”

The solution: Bailey created two kinds of vodka. Lotus Blue includes caffeine, guarana and taurine to help drinkers stay alert. Lotus White includes vitamins such as B-3, B-6, B-12 and C to help restore some of the nutrients lost when you drink.

The result: Lotus White has been picked up at about 1,500 bars catering to drinkers like Bailey. “When you’re in tech, you’re used to constantly reinventing the business you’re in,” Bailey says. “I looked at vodka and nothing much has been done to change it in the last 300 years.” Until now. Cheers.